Rethinking the Term “Nonprofit”

by Scott London

“Nonprofit.” It’s a curious word. It doesn’t tell us what it is, but it tells us what it’s not.

Given that the term has come to define a vast sector of American society — one that encompasses more than 1.5 million organizations and accounts for some 10 percent of the nation’s GDP — it would seem we could come up with a better phrase, or at least one that’s more descriptive.

The trouble is that many of the ideas put forward as an alternative simply miss the mark. Take, for example, the “voluntary sector.” The word accurately describes the activities of many charities, yes, but these organizations represent just a fraction of the total number of nonprofits in the U.S. And besides, the word implies that all those who work in the for-profit sector somehow do so involuntarily.

Other examples include the “third sector” and the “independent sector.” Hildy Gottlieb, director of the Community-Driven Institute, has made a compelling case for the term “community-benefit sector.” In a recent Harvard Business Review blog post, Dan Pallotta pitched the term “humanity sector.” And in an article some months ago in the Chronicle of Philanthropy, Suzanne Perry suggested the “delta” sector.

Part of the reason we’re stuck with the term “nonprofit,” I believe, is because the field is so conceptually ambiguous. Much of what falls under the rubric of the nonprofit sector does not actually involve social service, community benefit, or even doing good. There are many nonprofits that are advocacy-driven, faith-based, or politically motivated, even though their tax-exempt status would suggest they are serving the public interest in some way.

In the academic literature, the field is often described as “civil society” or “the public sphere,” suggesting a kind of middle ground between public and private, between government and the free market. I realize that these terms encompass more than just nonprofit organizations (including, as they do, churches, neighborhood associations, book clubs, and the like). But they get closer, I think, to the real sphere of activity we’re talking about here.

These terms also avoid the unhelpful do-gooder connotations of terms like “the community benefit sector” and “the humanity sector.”

I prefer the term “civic sector,” or what the organization Ashoka: Innovators for the Public refers to as “the citizen sector.” Both of these terms put ordinary people — citizens — at the center of the equation (as distinct from business and government). And as I see it, that’s really what this burgeoning sector is all about: the role of ordinary individuals, people like you and me, in inspiring new solutions, creating change, and making a real impact.